We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.
Taxes are one of life’s only certainties, and cryptocurrency is no exception.
Yes, your Bitcoin is taxable. The IRS considers cryptocurrency holdings to be “property” for tax purposes, which means your virtual currency is taxed in the same way as any other assets you own, like stocks or gold.
For most people who buy and trade crypto within online exchanges, accounting for it in your tax return is relatively easy. But like most things related to digital currency, things can get a lot more complicated the more active you are.
Here’s what you need to know about which activity you might need to report to the IRS, and how you can begin planning ahead for your 2021 taxes.
Reporting Cryptocurrency Trades on Your Tax Return
Purchasing Crypto With Dollars
Simply buying virtual currency with U.S. dollars and keeping it within the exchange where you made the purchase or transferring it to your personal wallet does not mean you’ll owe taxes on it at the end of the year.
If your only crypto-related activity this year was purchasing a virtual currency with U.S. dollars, you don’t have to report that to the IRS, based on guidance listed on